Senate Banking Committee Unveils Financial Reform Plan
The Senate Banking Committee unveiled its version of financial regulatory reform yesterday, including issuing a summary of highlights of the bill as well as the proposed bill. The 1336-page bill differs in substantial respects from the House version passed in December.
Most significantly with regard to consumer finance regulation, the Senate version does not include an independent Consumer Financial Protection Agency, but would house that function at the Federal Reserve. Specifically, Title X of the Senate Version calls for the creation of a "Consumer Financial Protection Bureau" to operate independently within the Federal Reserve.
Fed Proposes New Interest Rate and Fee Rule
The Federal Reserve yesterday announced that it has issued a new proposed rule amending Regulation Z to change regulations regarding late payments and penalty fees charged by credit card issuers and to require card issuers to reconsider increases in interest rates. The new rule comes on the heels of the recent effective date of Regulation Z amendments implementing the Credit CARD Act.
Among other things, the proposed rule announced yesterday would:
- Prohibit credit card issuers from charging penalty fees (including late payment fees and fees for exceeding the credit limit) that exceed the dollar amount associated with the consumer's violation of the account terms. For example, card issuers would no longer be permitted to charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee could not exceed $20.
- Ban inactivity fees, such as fees based on the consumer's failure to use the account to make new purchases.
- Prevent issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms.
- Require credit card issuers to inform consumers of the reasons for increases in rates.
- Require issuers that have increased rates since January 1, 2009 to evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.
The 30-day comment period for the proposed rule will begin when the proposed rule is published in the Federal Register.
